It’s been a bumper year for the BT (LSE: BT) share price. The FTSE 100 telecoms giant has shaken off its many troubles to rocket 23.63% higher over 12 months.
That’s an excellent reward for investors who decided BT Group had suffered enough, and it was time to take a punt. BT shares are still down 29.09% over five years. So long-term investors are still hurting, although they’ve bagged a fair few dividends in that time.
Like many companies, BT suspended shareholder payouts during the pandemic. However, payments rebounded quickly. The trailing dividend yield is 5.47%, comfortably above the FTSE 100 average of 3.5%. Let’s see what the chart shows.
Chart by TradingView
Better still, analysts forecast those dividends will keep climbing – to 8.16p per share in 2025, 8.4p in 2026, and 8.65p in 2027. By then, the yield is forecast to be 6.1%.
This FTSE 100 stock could fly
At this rate, BT investors could double their money in less than a decade, even if the share price doesn’t grow at all. But what if it does?
Today, BT’s shares cost 146.7p each. The pace of the recovery has slowed lately, as they’re up just 3.69% in three months. They don’t look expensive, though, with a price-to-earnings ratio of just 7.91. That’s roughly half the FTSE 100 average of 15.4 times.
They also look cheap measured by their price-to-sales (P/S) ratio of 0.7. This suggests investors are paying 70p for each £1 of sales BT makes.
BT still has a heap of net debt, and there’s no sign of that shrinking in the immediate future. It’s forecast to total £20.3bn in 2025, and edge up to £20.27bn in 2026. Plus it also has a huge pension scheme deficit. These are two key reasons why the stock has looked so cheap for so long (there’s always a reason).
With operating margins of 10.6% and a return on capital employed of 9.5%, BT is doing okay but not brilliantly. So what’s the outlook?
Analysts are surprisingly upbeat
Rather good, judging by the 13 analysts who are offering one-year price forecasts for BT Group. They’ve set a median target of 200.4p. If they’re right – and loyal BT investors will be hoping they are – that’s an impressive increase of 37.02% on today. Throw in a forecast yield of 5.7% and the total return is knocking on 45%.
As ever, forecasts are a movable feast. There’s a huge range in there, from a low of 110p to a high of 290p. The latter would see the BT share price double.
CEO Allison Kirkby has made a solid start but has some hard targets to hit. Can the company can really shed 55,000 jobs by the end of the decade? That’s 40% of its staff. Artificial intelligence will have to do a lot of heavy lifting here.
One big upside is that Kirkby claims to have hit the “inflection point” as investment in its full-fibre network Openreach peaks. The downside is that it faces competition from a host of smaller, nimbler broadband suppliers.
BT’s low valuation, high yield, and improved outlook are all highly tempting. It’s risky but I like the look of those broker forecasts and will buy it once I have the cash.
